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Re: st: XTIVREG question


From   Mark Schaffer <M.E.Schaffer@hw.ac.uk>
To   statalist@hsphsun2.harvard.edu, Stephanie Zobay <szobay@directvinternet.com>
Subject   Re: st: XTIVREG question
Date   Sat, 15 Jun 2002 21:43:57 +0100 (BST)

You are using both xtreg and xtivreg to estimate "random effects" 
models.  The two-step procedure you are using for 2SLS is incorrect 
and is not equivalent to Stata's default "random effects" estimator 
for xtivreg, G2SLS.

Have a look at the manual and at a panel data book like Baltagi's to 
understand how to do 2SLS with random effects by hand correctly.

--Mark

Quoting Stephanie Zobay <szobay@directvinternet.com>:

> Dear Listers,
>  I am not understanding the difference between manually doing
> a 2SLS and
> letting Stata do it with xtivreg.
>  I estimated each of 2 endogenous variables separately, saving
> the predicted
> values:
> 
>  xtreg srev2 unemp pctmdcaid pctprsner gsp2 popgrow
> . predict srevhat
> (option xb assumed; fitted values)
> 
> . xtreg lrev2 pcy1 tel pctschkid pctincpcrime taxbur
> . predict lrevhat
> (option xb assumed; fitted values)
> 
> Then I ran my regression using the predicted values for the
> endogenous
> variables:
> . xtreg staid2 srevhat lrevhat fdstss2 fdstot2 fedss2 fedoth2
> lbal
> 
> The result I get is completely different than if I use:
> xtivreg staid2 fdstss2 fdstot2 fedss2 fedoth2 lbal (srev2
> lrev2 = unemp
> pctmdcaid pctprsner gsp2 popgrow pcy1 tel pctschkid
> pctincpcrime taxbur
> fdstss2 fdstot2 fedss2 fedoth2 lbal)
> 
> What is the difference and how do I know which result is
> correct?
> 
> Stephanie
> 
> 
> 
> *
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> 



Prof. Mark Schaffer
Director, CERT
Department of Economics, School of Management
Heriot-Watt University, Edinburgh EH14 4AS
tel +44-131-451-3494 / fax +44-131-451-3008
email: m.e.schaffer@hw.ac.uk
web: http://www.som.hw.ac.uk/ecomes
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